By Sandra Guy | Get In Touch: @sandraguy | sguy@suntimes.comBusiness, Grid - August 12, 2014 12:00 pmWhy more students will be able to make procrastinating pay
Chicago-based Packback, a pay-as-you-go digital textbook rental service, has closed on a $1 million seed round of funding to build out its technology platform and expand to more college campuses nationwide.
The company, at 330 N. Wabash, expects to hire two more software developers by year’s end, bringing the workforce to nine, co-founder Mike Shannon said.
The startup lets students see the best prices for buying and selling textbooks and lets students download e-textbooks for $3 to $5 each, and use them for as little as 24 hours. Its patent-pending software platform prevents users from copying the textbooks.
Packback will be working with at least seven textbook publishers this fall, including three of the so-called Big Five publishers, Shannon said, declining to name them.
Long-term, the company wants to introduce publishers’ next-generation products by pinpointing where a student is getting stuck in a textbook and in real time linking the student to online learning resources, Shannon said.
The platform has grown from a pilot launch one year ago at Illinois State University, the founders’ alma mater, to 24,000 users on more than 100 campuses.
Packback’s value to publishers is bringing in revenue in an industry that costs publishers big-time.
The company, working with Chicago market research firm Shapiro & Associates, showed that its student users would have otherwise bought a used book or nothing at all if the students hadn’t used Packback. So Packback accomplished a 58 percent increase in publishers’ revenues during the 2013-14 school year during its pilot rollout at Illinois State University.
Packback pays a commission to 150 “ambassadors” — college students who market the service to their peers. The company aims to grow to 200 ambassadors by the fall semester.
“We’ve had 1,200 applications for ambassadors in the past two months, so we hope to eventually grow to more than 250 ambassadors by the end of the (calendar 2014) year,” Shannon said.
Packback’s most notable investment came in September 2013, when Shannon and co-founder Kasey Gandham touted the company on ABC-TV’s “Shark Tank” investment show.
They came away with a $250,000 deal from panelist Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team and HDNet high-definition TV network.
The remaining $650,000 comes from 20 other investors, including Howard Tullman, who runs venture capital fund G2T3V LLC and is CEO of the 1871 technology hub in the Merchandise Mart; Mark Achler, founder of Chicago-based Math Venture Partners and a former Redbox executive; Alan Matthew, founder of Tribal Ventures and one of Chicago’s most active angel investors; Mark Tebbe, founder of tech consultancy Lante Corporation, co-founder of Answers Corp. and operating executive director at Chicago private equity fund Lake Capital; and Rishi Shah, co-founder of Context Media and JumpStart Ventures.
Though Packback competes in the fiercely price-conscious arena of used textbook resellers, Shannon believes the company can change students’ reselling habits over the long term and, ultimately, keep textbook costs down because publishers won’t lose so much money on them. Now, publishers lose $5.5 billion each year in the $8.2 billion textbook industry because of used-textbook resellers undercutting industry-standard pricing.
Indeed, Packback’s name reflects its mission, Shannon said.
“Instead of books being a weight on students’ backs, we want to keep the weight in the students’ pockets,” he said.